VFS Digital Design/Flickr BALTIMORE (Reuters) - The prime contractor hired to build Maryland's flawed health exchange website will pay $45 million to the state and federal governments to avoid legal action over its performance, the state's attorney general said on Tuesday.

Maryland's health exchange program made national headlines last year when the state had one of the worst sign-up rates for state-run exchanges set up under President Barack Obama's Affordable Care Act.

Noridian Healthcare Solutions LLC has agreed to pay $20 million up front and an additional $25 million in annual installments of $5 million over five years, state officials said.

The payments represent a recovery of 61 percent of the total paid to the company for the failed website development and launch in 2013.

"This company never delivered on what it promised, and, as a result, tens of millions of taxpayer dollars were wasted, and thousands of Marylanders suffered delays and frustration," Maryland Attorney General Brian Frosh said in a statement.

"This settlement sends a message that the performance was unacceptable, and that those responsible will be held accountable," he said.The agreement, which is subject to regulatory approvals, will lead to the recovery of funds for both Maryland and the federal Centers for Medicare and Medicaid Services, which provided significant funding to develop the exchange.

It was not immediately clear how the $45 million would be split between Maryland and the federal government. Given the constraints on Noridian Healthcare Solutions' finances, officials said it was highly unlikely Maryland would have recouped a higher settlement amount from the company even if a larger judgment was obtained through litigation.

Noridian Healthcare Solutions' parent company, Noridian Mutual Insurance Co, has agreed to guarantee at least $40 million of the settlement payment. The settlement agreement also releases Maryland from all contractual obligations with Noridian Healthcare Solutions.Investigation of claims against other companies involved in the development and implementation of the Maryland exchange is continuing.

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